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Chapter 4 The Hotel Business. After Reading and Studying This Chapter, You Should Be Able to:. Define the following terms: hotel franchising, partnerships, leasing, syndicates, and management contracts Classify hotels by type, location and price Explain vertical integration

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Chapter 4 the hotel business l.jpg

Chapter 4The Hotel Business


After reading and studying this chapter you should be able to l.jpg
After Reading and Studying This Chapter, You Should Be Able to:

  • Define the following terms: hotel franchising, partnerships, leasing, syndicates, and management contracts

  • Classify hotels by type, location and price

  • Explain vertical integration

  • Name some prestigious and unusual hotels

  • Describe the effects of a global economy on the hotel industry


Franchising l.jpg
Franchising to:

  • Allows for a company to expand rapidly

  • Uses other people’s money (franchisee)

  • Franchisor

    • The company

  • Over 180 franchised hotel brands in North America today


Figure 4 1 franchised hotels among the top 10 corporate chains l.jpg
Figure 4-1 to:Franchised Hotels Among the Top 10 Corporate Chains


Figure 4 2 top 10 management companies l.jpg
Figure 4-2 to:Top 10 Management Companies


Trends in franchising l.jpg
Trends in Franchising to:

  • Curb appeal (fresh looks)

  • Location near highways, airports and suburbs

  • Expansion in smaller cities

  • New markets in proximity to golf courses and other attractions

  • Foreign expansion to increase brand awareness


Benefits l.jpg
Benefits to:

  • Set of plans and specifications for building

  • National advertising

  • Centralized reservation system

  • Participation in volume purchasing discounts

  • Listing in the franchisor’s directory

  • Low fee percentage charged by credit card companies


Drawbacks l.jpg
Drawbacks to:

  • Lack of operational power; must conform

  • High fees – both to join and ongoing

  • Central reservations produces 17-26% of reservations

  • Must meet standards as set by franchisor


Benefits and disadvantages for franchisor l.jpg
Benefits and to:Disadvantages for Franchisor

  • Benefits

    • Increased market share/recognition

    • Up-front fees

  • Disadvantages

    • Need to be careful in selection of franchisees

    • Difficulty in maintaining control of standards


Management contracts l.jpg
Management Contracts to:

  • Contract

    • The Players

      • Owner - financial responsibility

      • Management company - operational responsibility

    • Fee structure

    • Trend toward expansion of contract provisions


Hotel rating services l.jpg
Hotel Rating Services to:

  • Rating Services

    • AAA

      • American Automobile Association

      • Diamond Award

    • Mobil Travel Guide

      • Five Star Award


Ways to classify hotels l.jpg
Ways to Classify Hotels to:

  • Classifying Hotels

    • Location

    • Types of services offered

    • Market price levels


Figure 4 5 hotel rating guide l.jpg
Figure 4-5 to:Hotel Rating Guide


Location l.jpg
Location to:

  • Center city hotels

  • Resort hotels

  • Airport hotels

  • Freeway hotels

  • Casino hotels

  • Full service

  • Convention

  • Economy

  • Extended stay

  • Bed and breakfast


Hotels by price segment l.jpg
Hotels by Price Segment to:

  • Budget - $29-$39

  • Economy - $40 - $60

  • Mid-price - $60 - $100

  • Up scale - $100 - $200

  • Luxury - $140 - $450

  • All-suites - $95 - $175


City center hotels l.jpg
City Center Hotels to:

  • Public transportation available for business or leisure

  • Range of accommodations and services

  • Typically have a signature restaurant


Resorts l.jpg
Resorts… to:

  • Originally began due to rail travel

  • Greenbrier in West Virginia

    • www.greenbrier.com

  • The Halekulani in Wikki, Hawaii

    • www.halekulani.com

  • The Ritz Carlton Kapalua in Maui, Hawaii

    • www.ritzcarlton.com


More on resorts l.jpg
More on Resorts to:

  • “Captured Clientele”

  • Food service is unique

  • Diversified marketing mix

    • Children

    • Groups

    • Eco-tourism


Vacation ownership l.jpg
Vacation Ownership to:

  • Fastest growing segment of travel industry

  • Time share

    • A condo that is owned

    • Purchaser uses for a specific period of time each year

  • Vacation club

    • Purchase points that entitle purchaser to use of facility

    • Not real estate based


Vacation ownership20 l.jpg
Vacation Ownership to:

  • Estimated that 2 million households own vacation intervals at 3500 resorts in almost 90 countries

  • Helps ensure purchaser today’s prices for tomorrow

  • Yearly maintenance fees

  • Fixed or floating times

  • Example

    • www.rci.com


Airport hotels l.jpg
Airport Hotels to:

  • High occupancy due to location

  • Business, group and leisure travelers

  • Full service

  • 200-600 rooms

  • Convenient location

  • Airport shuttle service

  • Economical pricing


Freeway hotels l.jpg
Freeway Hotels to:

  • Prominent in the 1950s

  • Easy access to roadways

  • Park outside the room entrance

  • Example

    • Motel 6

    • www.motel6.com


Casinos l.jpg
Casinos to:

  • Heavy growth segment

  • Low room rates

  • Subsidized food and beverage

  • Themes are popular

  • 500 plus guest rooms

  • Variety of food operations

  • Contains a gaming room


Convention hotels l.jpg
Convention Hotels to:

  • Meet the needs of large groups

  • 500 plus rooms

  • Larger public areas to accommodate greater public demand

  • Banquet areas within and around the hotel

  • High percentage of double occupancy

  • Full-service oriented


Full service hotels l.jpg
Full-Service Hotels to:

  • Typically “Business Oriented”

  • Multiple food and beverage outlets

  • Meeting and convention services

  • Chain representation

    • Doubletree

      • www.doubletreehotels.com

    • Sheraton

      • www.sheraton.com


Economy budget hotels l.jpg
Economy/Budget Hotels to:

  • Represents 12 percent of total hotel rooms

  • Accomplished 37 percent of industry growth

  • Average room rate of $48.68

  • However, profit revenue is slow with an annual rate of 1 percent

  • Also considered budget hotels

  • Clean rooms

  • Reasonably sized and furnished

  • Continental breakfast


All suite l.jpg
All-Suite to:

  • Cater to guests for an extended period

  • Reduction in rate based on length of stay

  • More space than typical hotel

  • Examples

    • Embassy Suites

      • www.embassy-suites.com


Bed and breakfasts l.jpg
Bed and Breakfasts to:

  • A home away from home

  • Accommodation with an owner who lives on premises

  • Maintains a few rooms

  • Offers breakfast

  • Personable and quick service


Vertical integration l.jpg
Vertical Integration to:

  • Lodging companies meeting the needs of several types of guests based on price, facilities and amenities

  • Choice hotels which have several chains that meet its diverse clientele

    • Luxury - Clarion

    • Mid-scale - Quality Inn/Suites

    • Budget - Comfort Inn

    • Economy - Sleep Inn

  • www.hotelchoice.com


  • Marketing consortiums l.jpg
    Marketing Consortiums to:

    • Also called referral organizations

    • Numerous independent properties unite to compete with the marketing power of chain operations

    • Similar benefits as franchises, at a lower cost

    • Provides incentives for clients


    The best hotels l.jpg
    The Best Hotels to:

    • Some previous winners:

      • Oriental Hotel in Bangkok, Thailand

      • Regent of Hong Kong

      • Bell-Air of Los Angeles


    Unusual hotels l.jpg
    Unusual Hotels to:

    • Ice Hotel in Swedish Lapland

    • The Treetops Hotel in Kenya

    • Underwater Hotel in Australia

    • Capsule Hotel in Japan

    • The Burj Al Arab in Dubai


    Trends l.jpg
    Trends to:

    • Capacity control

    • Safety and security

    • Assets and capital

    • Technology

    • New management

    • Globalization


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